British Gas has announced a 5 per cent cut in its electricity prices, saving customers an average of £24 off their annual bill - while Scottish and Southern Energy (SSE) has announced a 3.8 per cent reduction on gas.

The British Gas price cut will affect 5.3million single and duel-fuel electricity customers.

Gas prices will not be reduced, it said, as although wholesale prices have fallen the firm claims the cost for gas bought to be delivered at the end of this year is up substantially compared to last year.

Energy cuts: British Gas has announced a 5 per cent price cut on electricity prices for 5.3million customers

Analysts immediately claimed both companies could have gone much further.

'These reductions are less than analysts expected and what consumers wanted,' said Mark Todd, director of price comparison service Energyhelpline.com.

'We believe there is room for price cuts of up to 10 per cent because of the recent dramatic falls in wholesale prices but clearly the major suppliers do not feel they have the necessary leeway to go much further than 5 per cent.'

However, he acknowledged that the companies were probably worried that wholesale prices may bounce back and that they also faced increased environmental costs.

British Gas, which is the biggest
supplier of gas and electricity to homes in Britain, said that it wanted
to make its prices as competitive as possible.

Customers will automatically see the price cut, which is being applied immediately, on their next bill and the firm estimated that it would save households an average of £24 a year.

However, the price cut does not affect customers on fixed tariffs and Economy 7 and Economy 10 plans.

The move comes after independent supplier Ovo Energy announced a 5 per cent cut to its fixed energy prices last week and 3 per cent price decrease by Co-Operative Energy in December.

British Gas said that it had chosen to reduce electricity prices, rather than gas, due to the way in which energy is traded.

The recent spate of spate of cuts comes after a decrease in wholesale costs. Energy is bought and sold on a wholesale market – firms buy their energy in advance and therefore are sometimes unaffected by daily price activity.

A spokesman from British Gas said that despite decreasing wholesale costs the price of buying gas on the wholesale market for delivery at the end of 2012 is trading on a price 14 per cent higher than the end of 2011.

Adam Scorer, director of Policy and external affairs at Consumer Focus, said: 'The widening gap between wholesale and retail prices has become the fault line for consumer confidence. Companies want to regain the trust of their customers. Narrowing this gap is a necessary part of achieving this.'

'The other four major suppliers should act now if they want to be seen as committed to an effective competitive market.'

However, the price reductions have not made a dent on the cheapest tariff league tables (see box below) and some experts think that firms could go futher.

Ann Robinson, director of consumer policy at uSwitch.com, said: 'The bottom line for consumers is that these cuts will go nowhere near cancelling out the £224 or 21 per cent hike in prices they’ve seen in the last 18 months.

We can only hope that these reductions are the first, and more will follow. But households can help to mitigate the impact of higher bills by shopping around for a cheaper deal and cutting back on the amount of energy they use by being more energy efficient.

Moving to dual fuel, paying by direct debit and signing up to a competitively priced deal will save you up to £420, far more than price cuts will give you based on today’s evidence.'

Paul Steedman, Friends of the Earth’s energy campaigner, said: 'Customers won’t be fooled by energy companies following EDF with last-minute winter price reductions – they know that even with today’s cuts their prices have soared within the last year.

'Tinkering in the margins of massive price hikes won’t fix our broken energy system – the Big Six are making billions in profits from their addiction to fossil fuels, whose yo-yoing prices make it hard for families to budget.'

WHICH ARE TODAY'S CHEAPEST ENERGY DEALS?

The cheapest online tariff is currently First Utility's iSave Dual Fuel
V9, with an annual bill size of £1,030. The cheapest of the 'big six' is
nPower - with its Go Fix 10, with an annual bill size of £1,078.

However, customers are tied into a fixed contract 8 April 2013. The
cheapest of the 'big six' online, if you do not want to fix your prices,
is with Scottish Power for an annual bill size of £1,085.

The cheapest standard plan (which means paying on receipt of the bill) remains EDF Energy for an annual bill size of £1,202.

The cheapest fixed is OVO's New Energy Fixed - this plan is an online
and fixed plan. Prices are fixed for one year from live date. Average
bill size is £1,061.

The longest fixed is Scottish and Southern Energy's Price Fix 7 - prices
are fixed for three years from going live. Annual bill size of £1,307.

These estimations are all based on a medium user consuming 3300kWh
electricity and 16,500kWh gas with bill sizes averaged across all
regions.